Digital Diatribes

A presentation of data on climate and other stuff

Posts Tagged ‘Environmentalism’

The Embarrassment That is the Allianz Climate Change Report

Posted by The Diatribe Guy on May 30, 2012

I am an actuary in the insurance industry, and so receive information of all sorts that are supposed to enlighten me and assist me in my job.   Whether it is a better model to use in forecasting future experience based on current trends for the purpose of pricing products, or accurate assessment of ultimate losses on current inforce products, it is imperative that I understand new advancements in predictive modeling, underlying trends, and results of different studies to most benefit my company and the customers we serve.

In this capacity, I recently came across a 97 page effort by Allianz, in partnership with – get this – the WWF (World Wide Fund for Nature), entitled “Major Tipping Points in the Earth’s Climate System and Consequences of the Insurance Sector.”   As someone who wants to base pricing considerations on observed experience and modeled trends, I was curious about this paper, and how it is implied that this is to be used by the insurance industry.   The report isn’t a new one, but it was  the first I had run across it.

The very first line of the paper reads:  “Climate change resulting from emissions of CO2 and other greenhouse gases (GHGs) is widely regarded to be the greatest environmental challenge facing the world today.”

 

Ominous.

 

Page one teaches us some interesting details.   I learned that there is no global agreement or scientific consensus for delineating ‘dangerous’ from ‘acceptable’ climate change, but 2 degrees Celsius seems like a good number.   The origin of that 2 degree number is not clear, but seems to be promoted based on the UNFCCC Assessment Report (AR4).

 

We then learn about tipping points.   The theory here is that, while temperature may increase gradually, there are points where a small change can make a big difference in the system.  The cited reference here is M. Gladwell, “The Tipping Point: How Little Things Can Make a Big Difference.”    It is unclear to me if this is a how-to book on marriage, or something spelling out the global catastrophes to come, but apparently it’s good enough for the reinsurance industry.

 

Well, anyway, this is just the Executive Summary, which includes examples of Tipping Points.   It appears we are talking about disasters such as effects of rise in sea levels, a shift in monsoon seasons, Amazon drought, and an overly arid Southwest U.S.   No mention of comets or alien attack, so I guess we’re sticking to “things we can control.”

 

There is then a touching “Take Home Message” to conclude the Executive Summary.   We learn that past emissions have already committed us to at least 0.6 degrees of further warming.   Because we’re lazy and lackluster in our efforts to combat it, the 2-3 degrees scenario is almost certain to happen.

 

Ominous.

 

I must say, as I read the actual body of the document, I was pretty disappointed with my reinsurance brothers and sisters.    We start with simply references to other works, clearly fed to them by WWF and other environmentalist groups.    UN studies, IPCC papers, etc. tell us there will not be a smooth transition into warmer temperatures.  This leads into the definitions and characteristics of tipping points, which – let’s be honest – insurance people will not know whether the studies they are reading are right or wrong.   They’re insurance people.  But in any case, it doesn’t appear that there was a serious attempt to reach out to alternative opinons on the matter.   Nobody called me, which can be expected.   More importantly, I don’t think Dr. Roy Spencer got a call either.   I don’t even think Jeff from the Air Vent was consulted.   A travesty.

 

Section 2 focuses on identifying tipping elements based on IPCC AR4.  

On a serious note, from a reinsurance standpoint, the things they are looking at need to be considered for the purpose of understanding exposure to risk.   What kind of storm activity tends to occur with changes in the ENSO amplitude?   What is the exposure in the event of differences in monsoon activity around the globe?   What are the insurance impacts to glaciers melting? What are the impacts of this event or that event?   All legitimate questions to make sure the company can sustain viability should certain things occur that impact loss payouts.   The issue I have here is putting such study in a document that doesn’t just use global warming theory as a “what if” scenario, but presents it as a given.

 

We then get into all sorts of scenarios around different tipping points.   It’s all the same stuff: Greenland, Arctic Ice, sea level rises, the Antarctic, carbon stores in permafrost (amplified global warming, you know), and so on.   Then, we get into tipping points that can tip other points, or something like that.

 

Section 3 highlights the greatest risks to our dismal future.  

 

So, what am I most disappointed in?   My disappointment is mainly that this is a piece of propaganda disguised as an insurance study.   If it is an insurance study, it’s a horrible one, and I’d fire anyone who resented it to me as a definitive assessment.   I see no industry experience and actual trends presented.   It is a “study” in the sense that it covers a lot of “what if” scenarios, which is an entirely legitimate exercise, but it provides them as a near certainty as opposed to a random probabilistic event.   Oh, sure, there are a lot of graphs and charts that lead one to believe that this is a rigorous study, but it is not.    It is a study that has, at its basis, a complete trust in the views and conclusions of a few UN-sponsored reports and other data that is derived in its entirety from the pro-AGW side.   It reeks of being a UN lapdog in anticipation of taking advantage of climate change scenarios and scare tactics for a lining of the pockets and future power grab.  

 

The study into the “what-ifs” seems pretty sound.    This part is fine, which is what I would expect from experts in the reinsurance industry, because this is what they do: they assess exposures, risks, and loss impacts GIVEN A SCENARIO IN WHICH TO ESTIMATE THAT IMPACT.     This paper, however, assumes the scenario to be reality.

 

So, what is my analysis on why Allianz would release an otherwise legitimate exposure analysis in the form of a drivel-packed, politically correct, report?

 

M.   O.   N.   E.   Y.

 

Suppose that Allianz convinces regulators and customers alike of the need for a “loss provision due to global warming impacts” in their policies.   Imagine tax advantages for surplus funds set aside for these events.   Now, imagine that every future weather event can be attributed to global warming…   wait…   I mean, Climate Change, so that a demonstrable drawdown on “global warming reserves” reinforces the idea of human-cause impacts on the weather and storms.   The propaganda becomes self-perpetuating, and ever more profitable.   At some point, it is likely that all weather risk can be transferred at a guaranteed margin to a global fund to cover all climate-change related events.  More conspiratorial, imagine a world of crony capitalism where those who were on the “right side” benefit disproportionately as the UN wields more power and is able to give preferential treatment to its friends with the “right” message.

 

This is simply Allianz seeing the future and hoping to profit from it.   And to help it along, what better than to actually promote the entire idea yourself?   All-in, so to speak.

 

Yeah, color me skeptical.   

 

I’ve got news for everyone who wants to give reinsurers the benefit of the doubt.   I’ve been in this business long enough to realize that despite all their fancy modeling and theories, they are the least rational reactionaries to risk there is.   Supposedly, this price is based on long-term history until something happens, at which time your rates quadruple.    Then, as competitors enter the market, they end up underpricing products.    So, whatever sophistication they start with, it goes out the window in a real hurry.

 

But I’m sure this is different.   And I’m sure they mean well.

 

For more fun with Allianz and climate change tipping points, check this out: http://knowledge.allianz.com/climate_tipping_points/climate_en.html

Posted in Actuarial Topics, Allianz, Business, Climate Change, Environmentalism, Global Warming, Indoctrination, Information, Peer Review, Politics, United Nations | Tagged: , , , , , , , , , , | 3 Comments »

Taking a Break to Evaluate a Really Stupid Idea

Posted by The Diatribe Guy on December 5, 2008

Some people wonder why people like you and me actually care whether or not the Anthropogenic nature of Global Warming is real. Or, for that matter, whether it’s even a bad thing. After all, they argue, even if it isn’t real isn’t it a good thing that people are more aware of pollution and alternative energy and all those things, so that we are better stewards of the environment?

The answer isn’t a simple “yes” or “no.” It would be simple if you eliminated the first part of the equation and simply said that we should be good stewards of the environment. I couldn’t agree more. And I am all for research into ways to make existing fuels burn cleaner and to make alternative energy forms useful and efficient.

But the reality is that whenever you base decision-making on bad information or bad assumptions, you end up harming more than helping. Even if the goal is generally a good thing (cleaner, safer environment), it just isn’t that simple.

There is no better example of this than the agenda of AGW proponents in the sphere of politics. We all likely agree with the statement, “We should reduce pollution as much as possible, within our means to do so.” The question that needs to be clarified, though, is “What is pollution?”

The day we started accepting Carbon Dioxide as a pollutant was the day all common sense went to hell in a handbasket. The mind-boggling dollars that are being discussed as a part of the solution to reduce Carbon Dioxide emissions is so numbing that most of us don’t even flinch any more with numbers in the hundreds of billions. We don’t even bother to consider the tax implications, on a global scale let alone a regional scale, of what these numbers mean. And that doesn’t even take into account lost efficiencies.

Jeff on “The Air Vent” (link to the right) has a number of posts on the impact of continuing to promote biofuels as a solution. Even if one could argue that the day will come when alternative fuels like these can be used more cleanly and efficiently, trying to do that now is not only premature, but counterproductive to efficiency, cost, opportunity cost, and the actual benefit in the end to a cleaner environment. At best, you can say that the current state of biofuels is a stepping stone in research to something better in the future, but as it stands now it is an outright lie to believe we are doing anything but hurting ourselves by this ignorant and obstinate push for biofuels. Check Jeff’s work.

So, today I open up a link on Drudge to find the following story:
Proposed Fee on Smelly Cows, Hogs Angers Farmers.

Your meat will now cost 20% more, suckers.

Your meat will now cost 20% more, suckers.

Here is an excerpt:

MONTGOMERY, Ala. – For farmers, this stinks: Belching and gaseous cows and hogs could start costing them money if a federal proposal to charge fees for air-polluting animals becomes law.

Farmers so far are turning their noses up at the notion, which is one of several put forward by the Environmental Protection Agency after the U.S. Supreme Court ruled in 2007 that greenhouse gases emitted by belching and flatulence amounts to air pollution.

“This is one of the most ridiculous things the federal government has tried to do,” said Alabama Agriculture Commissioner Ron Sparks, an outspoken opponent of the proposal.

It would require farms or ranches with more than 25 dairy cows, 50 beef cattle or 200 hogs to pay an annual fee of about $175 for each dairy cow, $87.50 per head of beef cattle and $20 for each hog.

The executive vice president of the Wyoming Farm Bureau Federation, Ken Hamilton, estimated the fee would cost owners of a modest-sized cattle ranch $30,000 to $40,000 a year. He said he has talked to a number of livestock owners about the proposals, and “all have said if the fees were carried out, it would bankrupt them.”

Sparks said Wednesday he’s worried the fee could be extended to chickens and other farm animals and cause more meat to be imported.

“We’ll let other countries put food on our tables like they are putting gas in our cars. Other countries don’t have the health standards we have,” Sparks said.

EPA spokesman Nick Butterfield said the fee was proposed for farms with livestock operations that emit more than 100 tons of carbon emissions in a year and fall under federal Clean Air Act provisions.

There is simply no way to overstate how ridiculously stupid such a proposal would be. I grew up on a dairy farm. We milked 60-70 cows at any given time, and had a number of heifers that we were raising both to replace the older cows or to send to market (or butcher for ourselves.) Now, I can guarantee you that 60-70 cows is a small, family operation. My dad was great with his money and so he did well, but he certainly didn’t rake in huge dollars. This was in no way some large-scale operation.

This proposal would have cost my dad another $12,000 per year. That means that one of two things would have to happen: food costs go up in order to cover the additional cost to the farmer, or the farmer goes out of business. There is no way he could have absorbed another 12 grand.

The rest of the article burned me up, too:

The fee would cover the cost of a permit for the livestock operations. While farmers say it would drive them out of business, an organization supporting the proposal hopes it forces the farms and ranches to switch to healthier crops.

“It makes perfect sense if you are looking for ways to cut down on meat consumption and recoup environmental losses,” said Bruce Friedrich, a spokesman in Washington for People for the Ethical Treatment of Animals.

“We certainly support making factory farms pay their fair share,” he said.

PETA… need I say more? Yeah, let’s just fail to recognize that people who have invested in all the equipment and infrastructure to operate a Dairy farm can just switch to crop-raising. No big deal, right? After all, they should pay their “fair share.”

Morons.

At least there was a heartening end to the article:

U.S. Rep. Robert Aderholt, a Republican from Haleyville in northwest Alabama, said he has spoken with EPA officials and doesn’t believe the cow tax is a serious proposal that will ever be adopted by the agency.

I am happy to see that. But a quick note to Representative Aderholt: Assume nothing! Many of the stupid things we do today were considered to be so ridiculous a few years ago that it couldn’t possibly be a serious proposal. These things start off as trial balloons until the ballon actually starts to float. It may not be now, but these inane proposals will continue and more will be passed.

Posted in Animals, Carbon Taxes, Climate Change, Current Events, Environmentalism, Global Warming, Greenhouse Gases, News, Opinion, Politics | Tagged: , , , , , | 3 Comments »